Challenge

From the launch of its direct-to-consumer service in November 2017, Philo processed subscription payments through Stripe Payments, choosing Stripe for its quick and easy setup and its reliable support for recurring payments.

At the same time, the company found that its subscription billing complexities were stretching the capabilities of its previous provider. Philo is the one of the only streaming services that allows customers to keep paying the price at which they subscribed as long as they remain active – even as price increases are introduced for new customers. Existing subscribers can choose between remaining on their legacy plan and paying the same, or paying the new higher price while also upgrading, since every price increase reflects additional content or new features. So, while Philo offers one core product, this legacy pricing effectively creates several billing tiers to manage, which presented greater complexity as time went on and taxed the billing provider’s infrastructure.

Other shortcomings of Philo’s original billing provider came into focus when season four of Yellowstone, starring Kevin Costner, premiered, causing a surge in Philo subscriptions. Unable to handle the influx, the billing provider’s system crashed and took weeks to recover. The situation was untenable for Philo.

“We needed a billing partner for whom we were a small- to medium-sized fish,” said Laura Dechant, Philo’s head of business operations. “We did not want to be a guinea pig testing the limits of a provider’s system.”

On the payment front, Philo realised that its budget-conscious, underbanked customer demographic required a targeted approach. While few subscription-based services accept prepaid cards, since they carry a higher risk of fraud and transaction failure, Philo decided to accept them due to their popularity among its customer base. Notably, some customers on fixed incomes were receiving their Social Security benefits payments in the form of prepaid debit cards.

While acceptance of prepaid cards allowed more people to sign up, depleted balances and short-term expiration dates on some of these cards were leading to more rejected transactions than Philo preferred. Further, the higher risk of fraud inherent with prepaid cards remained. Philo wanted to find solutions with a new provider to address these concerns.

Solution

Once Philo decided to leave its former billing provider, it considered several options in the space, ultimately choosing Stripe Billing. The advantage of integrating easily with Payments contributed to the decision, as did Stripe’s reliability and transparency.

“Not only is Stripe reliable, they also have the receipts,” said Dechant. “On the rare occasions when something goes wrong on Stripe’s side, they immediately let us know and are quick to respond, so we don’t waste time trying to pinpoint the source of a problem.”

Stripe Billing proved better able to accommodate the complexity of Philo’s pricing models, with support for promotional offers, legacy pricing, and upgraded pricing. Stripe also provided useful documentation and support resources, as well as the flexibility to scale up and adapt as Philo’s core product and slate of add-ons evolved.

To accommodate the surges in sign-ups prompted by viral TV sensations such as Yellowstone, Philo worked with Stripe to increase the infrastructure limits of its Stripe integration for a smoother sign-up flow at peak periods. Both companies’ teams communicated closely to ensure that these spikes in new accounts did not overtax Stripe’s systems.

As Philo’s payment partner, Stripe knew that acceptance of prepaid cards was not ideal given the potential for involuntary subscriber churn. Analysing Philo data, the Stripe team noticed that Cash App Pay – which allows people to pay with their Cash App balances, their debit cards, or prepaid cards – was by far the most popular payment method Philo’s customers were attempting to add. Cash App Pay made up nearly 20% of all new payment method requests, more than the next several methods combined. The Stripe team suggested that Philo begin accepting Cash App Pay as an alternative to prepaid cards.

As a result, in June 2023, Philo added Stripe’s Optimized Checkout Suite. The Optimized Checkout Suite includes a secure, embeddable UI component that allows businesses to accept 100+ payment methods, including digital wallets; the Stripe Payment Element; and Link, Stripe’s accelerated checkout solution that auto-fills customer card or bank details for a fast, easy checkout experience. Philo integrated using dynamic payment methods, which surface the most relevant payment methods via AI to maximise conversion and unlock access to other tools such as A/B testing.

“Once we started using Stripe’s Optimized Checkout Suite and added Cash App Pay so people without a credit card could sign up, it was so easy to just flip the switch and add more methods,” said Dechant. “We also turned on Apple Pay and Google Wallet in addition to other payment options.”

Around the same time, Philo took additional steps to tackle involuntary churn. The company replaced its practice of retrying failed payments at fixed intervals with Smart Retries, which identifies the optimal day and time to retry a payment. Philo also began using the rest of Stripe’s payments performance solution, including card account updater, which automatically updates card details for customer cards that have expired or been replaced; Adaptive Acceptance, which uses AI to identify and retry false declines in real time; and network tokens, which replace a card’s primary account number with a unique, secure identifier, enabling seamless payment processing. To further improve authorisation rates by identifying potentially fraudulent charges and confirming legitimate payment method updates, Philo used Stripe’s customisable fraud protection solution Radar for Fraud Teams.

Results

Stripe’s technology simplifies management of custom subscription tiers

Philo’s engineers write much of the code for the company’s complex billing tiers themselves – though they credit Stripe’s documentation for being thorough and well-organised. They also appreciate that Stripe provides supported libraries and modules for a variety of languages, as well as a parallel sandbox environment that makes testing easy and allows for faster development.

“Stripe is very developer-friendly in that their documentation is clean, accurate, and up-to-date, and we have these valuable Stripe support resources to help our engineering team chase down issues,” said Dechant.

Record number of new subscribers added day of Yellowstone premiere with Stripe’s 99.999% uptime

Having put infrastructure enhancements in place through close collaboration with Stripe, Philo accommodated a record number of new subscribers coinciding with the debut of Yellowstone’s final episodes beginning in November 2024 and continuing through the remainder of the season. With an uptime rate of 99.999%, Stripe provided consistent, uninterrupted access that far surpassed what Philo’s original billing provider had been able to guarantee.

“For the first time ever, we had a flawless Yellowstone execution from a billing perspective,” said Dechant. “We felt like we really nailed it thanks to Stripe.”

4.4% improvement in card acceptance rate from Stripe optimisations

Using a combination of products within Stripe’s payments performance products such as Adaptive Acceptance, network tokens, and card account updater, Philo’s card authorisation rate improved by 4.4%. And, thanks to Stripe Radar, Philo experienced a fraud reduction of 25%.

“If you look at our involuntary churn, there’s basically nobody churning out now due to having an expired card, because of network tokens,” said Dechant. “What’s nice about optimisations like network tokens and Adaptive Acceptance is that they’re really ‘set it and forget it.’ We see the benefits but don’t have to do a lot other than keeping an eye on the numbers.”

Cash App Pay generates payment success rate improvements from free trials

Implementing the Optimized Checkout Suite and accepting Cash App Pay gave customers without credit cards a single, secure payment alternative to prepaid cards. As a result, Philo was able to once again block prepaid cards. The success rate for first payments from users converting from free trials to paid subscriptions significantly improved, rising by 8.5% in two months.